On the Robustness of Air Pollution Policy Cost-Benefit Analysis

Licentiate thesis, 2017

In December 2013 the European Commission proposed an amendment of the National Emissions Ceilings Directive with new ambition levels for harmful emissions of SO2, NOx, NH3, PM2.5, and Non-Methane Volatile Organic Compounds. For the first time in European air pollution policy, the proposed ambition levels were based on the future cost efficient emission levels in the EU, as identified by using air pollution policy models based on the standard theories of welfare economics and environmental economics. However, it is not evident that the theory and methods used are robust enough for the results from such models to be converted to policy ambitions. For example, the models are limited by only considering a predetermined set of end-of-pipe solutions, and by requiring an economic valuation of avoided mortality. The purpose of the research presented in this thesis was to analyse the robustness of these models. The analysis used different analytical approaches. A cost-benefit analysis was used to identify net socioeconomic benefits of emission control in international shipping. A decomposition analysis was used to test if emission control contributes significantly to emission reductions. In addition, the thesis contains an initial robustness assessment of the foundations of the economic theory used in air pollution policy models. The results suggest that the robustness of current models would be increased by including options for emission control in international shipping. They also indicate that the current focus on end-of-pipe solutions for control of SO2 is sufficient for the analysis to be robust. Finally, there are observations and analyses that contradict parts of standard welfare economics and environmental economics but it is yet unclear what these contradictions imply for the robustness of air pollution policy models.